Mayfair lines up $310M for Ontario gold project

Mayfair Gold (TSXV: MFG; NYSE-A: MINE) has reached a preliminary financing agreement with Australia’s Macquarie Bank for up to $310 million (US$218 million) to help develop its Fenn-Gib gold project in Ontario, bringing the company closer to its planned transition from explorer to producer. The stock jumped.

The proposed package includes a $300-million project loan and a $10-million equity investment by Macquarie, Mayfair said Thursday in a statement. If completed on the proposed terms, the debt facility would cover most of the project’s estimated $450-million initial development cost, although Mayfair will still need to arrange additional funding. Macquarie will pay $4.26 apiece for its shares, a 10% premium to the stock’s five-day average trading price.

News of the financing package comes as Toronto-based Mayfair advances permitting, engineering and engagement with Indigenous communities and other stakeholders. It’s targeting a construction decision for the open-pit mine in 2028 and first production in 2030.

The deal “marks a significant de-risking milestone for Mayfair, with the proposed $300 million facility representing roughly two-thirds of the initial capex” outlined in a recent prefeasibility study, Riley Venton, a mining analyst at Atrium Research, said in a note to clients.

Mayfair shares climbed 5% to $4.01 Thursday morning in Toronto, valuing the company at about $270 million. The stock has traded between $3.19 and $6.65 in the past year.

Early drawdown

Also included in the agreement is an early $25-million drawdown that could help pay for preliminary construction work, equipment orders and detailed engineering before full construction financing becomes available.

When factoring in the company’s $23 million cash balance, Macquarie’s $10 million equity investment and the $25 million early-draw feature, “Mayfair is well positioned to advance permitting, Indigenous agreements, detailed engineering, and procurement ahead of a potential final investment decision in 2028,” Venton said.

Mayfair would pay an interest rate based on the Canadian overnight financing benchmark (CORRA), plus 4.75 percentage points during construction. The rate would drop to CORRA plus 4.25 points once the mine is completed. Up to $20 million in interest could be added to the loan balance during construction rather than paid immediately.

Quarterly repayments would begin six months after commercial production starts, Mayfair said. The loan would have to be fully repaid within 72 months of the initial drawdown following the early financing tranche.

Offtake right

In return for arranging the financing, Macquarie would receive the right to buy the first 50,000 oz. gold produced by Fenn-Gib each year, up to a maximum of 300,000 ounces. The gold would be sold at a published reference price, minus US$50 per ounce. Half of the offtake right would take effect when the engagement letter is signed and Macquarie’s equity investment closes, with the remainder becoming effective when the loan closes.

The proposed loan would be secured against the project. Macquarie would act as lead arranger, agent and sole underwriter, and could seek other lenders to take at least 30% of the facility.

The agreement is not yet binding. It remains subject to due diligence, including an independent engineering review, final loan documents and customary closing conditions. The equity investment also requires stock exchange approval.

“Fenn-Gib stands out as a Canadian gold project with the potential to become a significant new producer,” Mike Burns, Macquarie’s head of mining finance for the Americas, said in the statement. “Mayfair has taken a disciplined approach to advancing and de-risking the project, and we are pleased to bring Macquarie’s global mining and project finance experience to support the next stage of its development.”

Probable reserve

Located about 80 km east of Timmins, Fenn-Gib hosts 181.3 million indicated tonnes grading 0.74 gram gold per tonne for contained metal of 4.3 million oz. gold, according to a 2024 resource. Inferred resources are pegged at 8.9 million tonnes grading 0.49% gold for about 141,000 oz. of contained metal.

January’s prefeasibility study focuses initially on a higher-grade probable reserve of 1 million oz. contained in 25.1 million tonnes grading 1.29 grams gold. The proposed mine would process 4,800 tonnes of ore daily over a 14.3-year operating life.

Annual output is projected to average about 64,100 oz. of gold over the mine life, including about 71,300 oz. annually during the first six years.

At a base-case gold price of US$3,100 ($4,402) per oz., Fenn-Gib is estimated to have an after-tax net present value of $652 million, a 24% internal rate of return and a 2.7-year payback period.